Craigslist Rips Up Classifieds

Craigslist and its phenomenal Internet classified ad service are disrupting businesses left and right by not charging for the vast majority of postings on its website.

Craigslist makes newspaper publishers such as Gannett (NYSE: GCI) , Tribune (NYSE: TRB) , Knight Ridder (NYSE: KRI) , and E.W. Scripps (NYSE: SSP) quiver in fear by siphoning off a traditional cash cow: classified ads. It's a formidable foe to other Internet job-posting services like Monster (Nasdaq: MNST) . It's growing in prominence in the real estate market. It can even help you find a date. If you're looking for a used mattress or bookshelf, or you simply want to rant about whatever's on your mind, Craigslist may be your best friend.

Despite all of that, Craigslist CEO Jim Buckmaster says that the company, which is privately held and has been profitable for at least five years, is non-commercial; the only ads it charges for are help-wanted postings by employers inSan Francisco, New York City, and Los Angeles. Nonetheless, eBay (Nasdaq: EBAY) , seeing Craigslist's potential, bought a 25% stake last year.

David Gardner recently interviewed Buckmaster on The Motley Fool Radio Show. Following are highlights of their conversation.

David Gardner: For those who aren't familiar, let's start off with the obvious question: Who is Craig, and what is his list all about?

Jim Buckmaster: Craig [Newmark] is a long-time techie who started a little email . list in 1995 for his friends in San Francisco. They told their friends, and those friends told their friends, and it slowly grew. Ten years later, the numbers are the ones you mentioned.

David Gardner: A friend of one of our producers, in fact, is marrying someone she met on Craigslist. She said there must be a gazillion stories like this. Can you tell us a few?

Jim Buckmaster: We love to hear those stories. Our favorites are the ones we get fairly frequently, where the person has found not only their spouse but their job, their apartment, all of their furnishings, their cat or dog, a lot of their current friends, etc., all on one site and all for free. That is the kind of thing that makes the job fun.

David Gardner: Why has Craigslist been resistant to making more money?

Jim Buckmaster: We are not so much resistant. I mean, we do a very good business. We have been in the black quarter after quarter for five or more years. I think probably the better question is why people are still paying. I checked recently. I think it is still at $18 billion, the classifieds industry. It is mind-boggling to us that so much money still goes into a problem that has basically been solved and the costs are extremely low. In our minds, far too much capital is going into something where they could be finding cures for diseases, putting men on Mars or whatever ... with that money.

David Gardner: Does Craig ever look at those guys who started Google (Nasdaq: GOOG) and say, "Hey, I could be worth billions also?"

Jim Buckmaster: We love what Google does. Obviously, what they do far outstrips what we are able to do as far as the value that they provide to society. We are doing what we can, but we wouldn't compare ourselves to them. "Beyond making a very comfortable living," which all of us do, "how much do you really need?" is something that Craig will often say. But we do want to have a very strong business, and our revenue has been rising considerably for quite some time, so we have no complaints.

David Gardner: And as I mentioned earlier, you have 18 employees. Give us a ballpark idea: How much does it cost to operate this website?

Jim Buckmaster: Well, you can kind of gauge from our low headcount, and I can add a few items: that we use all open-source software, so we don't pay a dime for software. Hardware and bandwidth costs, as you know, drop month after month. So in some ways, our costs tend to drop over time, and with a modest headcount of 18, you can kind of do the math that it doesn't cost a lot.

David Gardner: If we look forward, let's say three to five years, do you see additional commercial endeavors right now that would be in play three to five years from now that you are just not doing now?

The rest of the interview, including the answer to that last question, is available to subscribers of the Motley Fool Rule Breakers newsletter. Click here to take a free 30-day trial and gain access to the interview and all of the Rule Breakers team's stock picks. Current Rule Breakers subscribers can click here to go directly to the interview.

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